Aircel likely to go for debt restructuring

A strategic debt restructuring program (SDR) is the only option left for the Malaysia’s Maxis-owned telco that cannot adopt the bankruptcy route.Deepali Gupta&Devina Sengupta | ET Bureau | Updated: October 02, 2017, 09:56 IST

Telecom operator Aircel may start an independent debt restructuring programme now that its proposed merger with Reliance Communications has fallen through, people aware of the firm’s alternative plans said.

In an email sent to employees on Sunday night, Aircel chief executive Kaizad Heerjee said that while decision to call off the merger with Reliance Communications (RCom) “was disappointing”, the company needs “to move ahead and explore other business options”.

ET has seen a copy of the email.

According to sources, a strategic debt restructuring program (SDR) is the only option left for the Malaysia’s Maxis-owned telco that cannot adopt the bankruptcy route because that would instantaneously invoke Maxis' bank guarantees.

Aircel did not respond to emailed queries as of press time Sunday.

Heerjee, in his email to employees, said the company will work to “crystalize a revised roadmap that incorporates the current difficult market conditions”. He said the financial stress in the sector is impacting all operators and “Aircel is no exception”.

Asking employees to remain focused , the CEO’s letter said that for the first time there was “slight improvement “in customers using Aircel’s services and the telco’s gross add engine continues to perform. Gross adds is the number of new subscribers added by a company.

Heerjee mentioned that in the wake of the regulator slashing interconnect user charges (IUC), Aircel marketing team has put in place a set of products that will help it “remain competitive in the market”. He signed off saying that the firm is in a better opportunity to add subscribers and grow revenue market share than before.

According to sources, a few weeks ago, the carrier which has a debt of Rs 20,000 crore had approached financial consultants to explore such a restructuring and has sought advice on whether it could use insolvency or debt recast to cut debt and continue as a niche player in a limited number of circles.

A senior executive at one of the incumbents said Aircel is withdrawing from Bombay, Maharashtra, Rajasthan, Punjab and Haryana circles.

Sources said Aircel’s Malaysian parent has recommended the company to explore ways to continue on its own.

Aircel will then try what Telenor couldn't achieve — a smaller but profitable operation. Some of Aircel's south India operations and its older circles in the north already generate profit at an operating level, said sources aware of the new developments.

“In a market of just three private operators, the survival of a niche services aimed at specific customer classes is possible ," said a person familiar with details.

Another person close to the matter said Heerjee had held a closed-door meeting of the company’s top management a few weeks ago while the RCom merger process was still waiting for its petition to get admitted in the National Company Law Tribunal (NCLT). In that meeting, the CEO advised his finance, human resources and technology heads to plan running the company as if no merger with RCom was planned, the person said.

On Sunday evening, Anil Ambani-owned RCom called off its merger with Aircel, citing regulatory uncertainties and hinting at sabotage by “vested interests”, dealing a severe blow to the hopes of the two debt-ridden telcos to better take on stronger rivals such as Bharti Airtel and Reliance Jio and raising questions on their long-term survival.

Aircel has lost little over 9 lakh customers and RCom has lost roughly 53 lakh customers from December — when merger announced — till July. Their losses too have widened.

Aircel had a subscriber base of 8.9 crore as of July end.

As part of merger plan, Rs 15,000 crore of Aircel’s total debt of Rs 20,000 crore was to be transferred to the 50-50 merged entity and the rest to be undertaken by Maxis.

The Telecom Regulatory Authority of India (Trai) pulled up Bharti Airtel and Vodafone Idea for warning subscribers of certain plans that their SIM cards would be deactivated if they do not recharge their pre-paid accounts though these subscribers had the minimum required balance.